The Matthews Pacific Tiger Fund (Trades, Portfolio) seeks sustainable long-term capital appreciation by investing mostly in Asian companies, excluding Japan, with a focus on emerging economies. It evaluates stocks using a bottom-up, fundamentals-based approach with a focus on long-term results. The fund is managed by Sharat Shroff, Inbok Song and Winnie Chwang.
Based on its investment criteria, the fund’s biggest buys for the quarter were Chailease Holding Co. Ltd. (TPE:5871, Financial) and Meituan (HKSE:03690, Financial), while its top sells were Baidu Inc. (BIDU, Financial) and HMM (XKRX:011200, Financial).
The fund established a new stake worth 15,767,150 shares in Chailease Holding (TPE:5871, Financial), giving the stock a 1.64% weight in the equity portfolio. During the quarter, shares traded for an average price of 232.22 New Taiwan dollars ($8.33).
Taiwan-based Chailease is a holding company whose subsidiaries are primarily engaged in traditional leasing, installment payment and receivables transfer businesses. It offers import-export factoring and direct financing.
On Nov. 2, shares of Chailease traded around NT$269.50 for a market cap of NT$390.88 billion. According to the GuruFocus Value chart, the stock is modestly overvalued.
The company has a financial strength rating of 3 out of 10 and a profitability rating of 4 out of 10. The Altman Z-Score of 0.87 suggests the company could be in danger of bankruptcy, though the Piotroski F-Score of 5 out of 9 is typical of a stable financial situation. The return on equity of 22.34% and return on assets of 3.52% are better than 91% of industry peers.
The firm increased its Meituan (HKSE:03690, Financial) holding by 2,453,400 shares, or 100.17%, for a total of 4,902,700 shares. The trade had a 0.93% impact on the equity portfolio. Shares traded for an average price of 244.56 Hong Kong dollars ($31.43).
Meituan is a Chinese company that operates a network of apps, which together form an online shopping platform that helps connect customers with local business for retail, services, hotel bookings, transportation, dining and more.
On Nov. 2, shares of Meituan traded around HK$271 for a market cap of HK$1.66 trillion. According to the Peter Lynch chart, the stock is trading above its fair value but in line with its median historical valuation.
The company has a financial strength rating of 5 out of 10 and a profitability rating of 3 out of 10. The cash-debt ratio of 2.31 and Altman Z-Score of 11.85 indicate a fortress-like balance sheet. Revenue has been growing steadily and net income has also been on the rise, though the company’s bottom line dropped back into the negatives in the most recent quarter.
Baidu is a Chinese internet and technology giant that specializes in artificial intelligence, internet services, search engines and related products. It has access to the world’s largest domestic addressable population of internet users.
On Nov. 2, shares of Baidu traded around $162.27 for a market cap of $56.48 billion. According to the GF Value chart, the stock is fairly valued.
The company has a financial strength rating of 5 out of 10 and a profitability rating of 8 out of 10. The Altman Z-Score of 2.61 and Piotroski F-Score of 6 out of 9 show a stable financial situation. The three-year revenue per share growth rate is 9.9%, while the three-year Ebitda per share growth rate is 13.2%.
The fund also sold its 2,477,089 shares of HMM (XKRX:011200, Financial), which had a -1.03% impact on the equity portfolio. Shares traded for an average price of 40,460.80 South Korean won ($34.33) during the quarter.
HMM, or Hyundai Merchant Marine, is one of the largest multinational marine shipping companies in the world. Headquartered in Seoul, the Hyundai Group affiliate operates a fleet of more than 110 ships, including full container carriers, liquid natural gas carriers, oil tankers and bulk carriers.
On Nov. 2, shares of HMM traded around 27,400 won for a market cap of 13.40 trillion won. According to the Peter Lynch chart, the stock is trading above both its intrinsic value and its median historical valuation.
The company has a financial strength rating of 4 out of 10 and a profitability rating of 2 out of 10. While the Altman Z-Score of 1.8 puts the company in the bankruptcy distress zone, the interest coverage ratio of 8.31 shows it should be able to continue making payments on its debt. The return on invested capital has recently risen above the weighted average cost of capital, meaning the company is creating value for shareholders.
As of the quarter’s end, the fund held shares in 71 common stocks valued at a total of $8.44 billion. The turnover rate for the quarter was 11%.
The top holdings were Taiwan Semiconductor Manufacturing Co. Ltd. (TPE:2330, Financial) with 6.48% of the equity portfolio, Tencent Holdings Ltd. (HKSE:00700, Financial) with 4.74% and Samsung Electronics Co. Ltd. (XKRX:005930, Financial) with 4.65%.
In terms of sector weighting, the fund was most invested in technology, consumer cyclical and financial services.